Your company’s budget is just like putting together a puzzle. Every piece is important because, without all of them, it will never be complete. If your budget is not a completed plan, it is not a plan at all.
That’s why your company’s budget must have practical, sustainable, and realistic IT allocations.
As you take the next couple of months to prepare and finalize your 2022 budget, we have a few best practices so that you don’t underestimate your company’s IT expenses.
Examine Your Current Budget
To see where your IT budget needs to improve, let’s start with what your IT budget currently looks like today.
First, we recommend looking at each of your IT budgets over the last three years, converting them to a percentage of your total annual revenue. Then, compare these three IT budgets in chronological order to analyze for trends.
While you look at your IT budgets from the past three years, ask yourself (and others) the below critical questions to see if your IT budget allotments have been meeting your needs.
IT budget assessment questions:
- Over the last three years, has our IT budget grown, shrunk, or stayed the same?
- Have we gone over our IT budget during these last three years? If so, how often, and for what purpose?
- Have we encountered any cybersecurity issues in the past year?
- Is another part of the budget supporting purchases, salaries, or expenses that should fall under our IT budget?
- Are there any IT processes that are impeding company efficiency?
- Do we have any significant expansions planned that would require IT upgrades within the next year?
- Are we migrating from on-premise to cloud solutions?
- Has the COVID-19 landscape altered our remote capabilities and given rise to security concerns?
- Is our company preparing for equipment that is reaching end-of-life?
It’s essential to consider the information you discover from answering the assessment questions we provided above.
For example: If you’re planning to expand to a new location within the next year or add several new team members to your growing team, you will want to factor those changes into your projected IT expenditures accordingly.
Determining Where Your Budget Needs To Be
Now that you know where your budget currently stands and have factored in any projected IT expenditures, it’s time to create the IT budget that your company deserves. Below is a straightforward formula to get you started.
IT budget formula
IT budget = Total annual IT expenditures (hardware, software, services, IT staff labor, and depreciation). This should typically fall between 2-4% of your annual revenue.
This formula is a simple but powerful way to calculate your IT budget. It incorporates all your needs and expenses.
Embrace the Adjustments
It’s tempting to keep an IT budget the same from year to year, especially when managing a large organization with multiple departments to oversee. We know that it’s easy to leave your IT budget alone if you haven’t encountered significant problems, but the process of assessing and adjusting your IT budget does more than prepare your finances. It allows you to streamline your operational processes, improve team morale, and protect your company and customers, all through improved IT services.
If you have questions regarding your company’s IT budget or the services we offer, we would love to hear from you! You may contact us at Entre Technology Services.